The Gradual Revolutionaries

Here's a simple image, not entirely the product of spin-doctoring, that's helping Australia's conservative government: it's a miserable world beyond the nation's borders. Saddam Hussein has been defeated, yet tyranny, fanaticism, anarchy and terror are never far away; the U.S. economy is listless; the sars virus can hop on a jet and pass through immigration and customs posts unchecked. But at home, the drought appears to be breaking, interest rates and inflation are low, the economy continues to grow, and in six weeks' time every Australian income taxpayer will receive a tax cut. The wizards of this home-grown prosperity, with gracious nods to their support crew, bureaucrats and previous Labor governments, are Prime Minister John Howard and Treasurer Peter Costello. "Our country is doing as well if not better than nearly all of the other countries in the developed world," Costello told the National Press Club last week.

As economic managers since March 1996, the two have been very successful. One million new jobs have been created, Commonwealth debt has been reduced by $A63 billion, household incomes (and wealth) have grown considerably. At the same time, the government has recast economic and social institutions. Among a number of high-profile reforms, it introduced a 10% goods and services tax, changed workplace relations, partly privatized telco Telstra and cut the size of the public service. In doing so, the coalition government has sometimes been accused of radical neo-liberalism by those on the left of the Left. In reality, the big spending cuts were made in the early years of office. A balanced budget (small surpluses or deficits hardly offend) is now Holy Writ in Canberra.

In some ways, the government has lately succumbed to tax-and-spend populism, pushing social spending to its middle-class constituency while also garnering votes among groups that don't traditionally support the conservatives. Working-class dwellers on the urban fringes and younger couples have received grants to purchase their first homes. Retirees of means have been coddled with welfare and health-care entitlements. More funds are going to private schools, and family benefits are being spread more widely. Costello rejects the notion out of hand, but this is the highest-taxing government in living memory. A strong economy has pushed young people into jobs and raised the incomes of other workers, enabled business profits to surge, and swollen customs duties and excise. With the Treasury brimming with funds, the coalition has spent handsomely - on target groups, but not the needy. Although border protection and national security issues got Howard over the line in November 2001, big-spending measures put him back in the race six months before the election.

Still, quietly and artfully, fiscally pragmatic Howard has successfully pursued structural reforms in line with long-cherished social and political values. The Telstra floats have driven private share ownership to new heights. Qualifying tests for employment benefits have been tightened. And all the while, Howard has tried to extend individual choice and opportunity, user-pays social services, and the free operation of markets. The changes to Medicare and higher education detailed in last week's Budget - though gradualist in nature - will over time see most individuals bearing greater personal responsibility for those services. As Sydney Morning Herald commentator Geoff Kitney wrote last week: "The Howard change has been incremental but adds to an agenda which is as sweeping as the change that occurred in the pyrotechnic politics of the Hawke/Keating era."

In a new book, The Experience of Middle Australia: The Dark Side of Economic Reform (Cambridge University Press), sociologist Michael Pusey used interviews with 400 people in the "broad middle" (taking out the top 10% and bottom 20% of earners) to build an argument that two decades of reform had left them insecure, angry and distrustful of government. "There's a sense of moral disquiet about what's happening to society," he told Time. Go doorknocking with a politician "who listens" at election time in a marginal seat and you're likely to see them cop an earbashing or a brush-off from behind the screen door. Like campaigning M.P.s, Pusey's interviewers have given people a platform to complain. So how have the economic reformers held onto voter support? "By using fear tactics," says Pusey. "Electoral trickery. Pressing the right buttons while insecurity is rife."

Reformist governments have shaken up society, while the condition of globalization (at once a malady and a blessing) has also been destabilizing. But economic and social change, while not supported in opinion polls, has become a fact of life for Australians - and by and large most people have learned to adapt. According to Andrew Norton, a research fellow at the Centre for Independent Studies who is writing a paper about public opinion and economic reform, successive governments have implemented policies that were not in themselves popular, but that were sold to Australians on the basis that they would meet bigger goals: more jobs, rising incomes, less tax. The triumph of Howard and Costello has been that while "the economy" (always a conservative strong point) was replaced as the No. 1 issue during the 1990s by health and education - social issues traditionally the domain of Labor - the coalition government has defied conventional political thinking by holding onto power.

Retired economic mandarin Fred Argy believes that the ascendancy of Howard and Costello has hastened a long-term retreat from redistributive policies - despite strong community support for those equalizing mechanisms - by clawing back measures promoting equality of opportunity in education, housing, employment and industrial relations. "Politicians have an infinite capacity to obfuscate," says Argy, who has observed and advised the Canberra species from Menzies to Whitlam to Howard. Not only has Howard thrown up other concerns to distract voters - immigration and border protection, for instance - he has conned the electorate with a mantra that public debt is intrinsically bad and that redistribution is not affordable. "The Prime Minister has brilliantly managed opinion," says Argy. "Howard has an uncanny ability to deliver his ideological agenda in a surreptitious and gradual way." In his new book Where To From Here? Australian Egalitarianism Under Threat (Allen & Unwin), Argy lays out how globalization has changed the political dynamics of redistribution. First, it has fostered an opinion climate less friendly to broad-based redistribution. Second, it has ushered in a new power bloc of multinational corporations, fund managers and ratings agencies that strikes fear into the hearts of social-democrat politicians. Globalization has helped Howard and spooked federal Labor from pitching to its constituency.

Labor governs in all eight Australian states and territories, its dominance based on exploiting social spending. But federally Howard appears invulnerable, and Costello, his likely successor, is licking his lips. They are implementing large-scale change - and eating into Labor's support base. No wonder they appear pleased with themselves. In truth, there has been little difference between the major political parties, only light shades on the core matters of governing: the economy, security, trade and welfare. Of course, this leads to stable - if sometimes boring - politics. For voters, personality, style, communication and leadership therefore assume a larger role in product differentiation. Howard, who has spent much of his career being underestimated by Labor, has blitzed his opponents in recent years. Labor leader Simon Crean is a forlorn figure - of limited charisma, he haplessly marshals an undisciplined mob of hacks and tyros. Policy development has been relegated to fruitlessly chasing down Howard and Costello, wherever they may dash.

The duo's careful stage-management of issues has rarely exposed them to risk. In changing Medicare and higher education, however, they could be playing with fire. Sure, these guys are good, but this is where Labor would like to keep the contest. Under the government's proposed measures, individuals will ultimately pay more of the cost of health services out of their own pockets - and that cost is expected to rise over time. The changes to higher education will entrench the market in this sphere as well; students will pay more for their courses. They will also have greater choice, if things go to plan - not a bad outcome for consumers. But, as with many deregulatory steps, confusion and higher costs could ultimately swamp the benefits of change - especially if quality-control is neglected by revenue-hungry university vice-chancellors.

Can Labor make any headway here? In his Budget reply on Thursday night, Crean looked anything but a leader with his back to the wall. His lines were direct and simple; he invoked Labor tradition, "a new deal," saving the great Murray river, and put health and education front and center. "We are the builders," Crean said to great applause from his colleagues. "They are the wreckers." If Labor looks to the bright side, this is what it might see: Howard won't be around forever; the only opinion poll that counts is the one on election day; the public is so fickle that no incumbent government can take matters for granted. But these are the truisms that comfort serial losers and misty-eyed true believers. No one doubts what Howard and Costello stand for - regardless of how they sell it, their works are clearly on display.

And what does Labor offer? Apparently, there is no shortage of "Third Way" ideas that publishers have found worth binding. Feel-good jargon aside, not much in that policy agenda is distinguishable from the coalition's or from rejected past Labor ones. It might be more fruitful for Labor to adopt the case for redistribution in Argy's book, rethinking its stand on taxes, public debt, and social priorities. What about people? Below Crean there is a tier of youngish, low-profile, clever M.P.s of ambition whose last leadership post was school captain. Former leader Kim Beazley is attracted to the bumper-sticker ideal of respect; although he has lost two elections to Howard, he appears ready to parachute into the crisis. But what Labor really needs is to open up the conversation with the electorate through a leader who can lead - not listen. Listening is for sociologists and journalists. Labor needs to stop being scared of voters and its own recent demons; in finding a way to win back voters, it must, like Howard and Costello, rearticulate long-held convictions and change the temper of the times.